Correlation Between Test Research and Elan Microelectronics
Can any of the company-specific risk be diversified away by investing in both Test Research and Elan Microelectronics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Test Research and Elan Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Test Research and Elan Microelectronics Corp, you can compare the effects of market volatilities on Test Research and Elan Microelectronics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Test Research with a short position of Elan Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Test Research and Elan Microelectronics.
Diversification Opportunities for Test Research and Elan Microelectronics
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Test and Elan is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Test Research and Elan Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elan Microelectronics and Test Research is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Test Research are associated (or correlated) with Elan Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elan Microelectronics has no effect on the direction of Test Research i.e., Test Research and Elan Microelectronics go up and down completely randomly.
Pair Corralation between Test Research and Elan Microelectronics
Assuming the 90 days trading horizon Test Research is expected to generate 1.11 times more return on investment than Elan Microelectronics. However, Test Research is 1.11 times more volatile than Elan Microelectronics Corp. It trades about 0.07 of its potential returns per unit of risk. Elan Microelectronics Corp is currently generating about 0.06 per unit of risk. If you would invest 6,560 in Test Research on September 3, 2024 and sell it today you would earn a total of 6,440 from holding Test Research or generate 98.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Test Research vs. Elan Microelectronics Corp
Performance |
| Timeline |
| Test Research |
| Elan Microelectronics |
Test Research and Elan Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Test Research and Elan Microelectronics
The main advantage of trading using opposite Test Research and Elan Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Test Research position performs unexpectedly, Elan Microelectronics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Elan Microelectronics will offset losses from the drop in Elan Microelectronics' long position.| Test Research vs. Taiwan Semiconductor Manufacturing | Test Research vs. Yang Ming Marine | Test Research vs. ASE Industrial Holding | Test Research vs. AU Optronics |
| Elan Microelectronics vs. Taiwan Semiconductor Manufacturing | Elan Microelectronics vs. Yang Ming Marine | Elan Microelectronics vs. ASE Industrial Holding | Elan Microelectronics vs. AU Optronics |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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